The question is whether the production of capital goods will show a sustained rise. There were spurts in capital goods output in early 1995 and 1997. These, however, petered out, and the industrial economy languished in stagnation.

So, will this year's green shoots sprout lush? Probably not, judging by the slack in consumer demand. The consumer goods sector did well in the 1998 first quarter, but its growth fell to a negative 1 per cent in August. There was also a slip in the production of consumer durables after the first quarter.

Investment is made in anticipation of rising demand. Strong consumer demand boosts capacity utilisation. This, in turn, triggers investment in new capacity. Trouble is, consumer demand after peaking inmid-1996 has tended to hover at a low level and fell in June 1998. Between December 1997 and June 1998, the index of capital goods output rose, but the index of consumer goods production declined. Noting this, NCAER concludes that the recent spurt in capital goods production "will not be sustained".

NCAER shows that this year's upturn in non-POL imports is not fuelling industrial growth, because excluding gold and silver imports, there has been no sustained rise in non-POL imports.

But why is income not spent on consumer goods -- "essential for industrial revival", according to NCAER -- and put in bullion instead? And why are savings moving away from investment in productive assets into gold and silver as in the pre-planning era? Is under-consumption leading to under-investment, or is it the other way round?